BILL NUMBER: AB 1326 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Members Gorell and Bradford
FEBRUARY 22, 2013
An act to add and repeal Sections 6376.6, 17053.83, and 23623.3 of
the Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1326, as introduced, Gorell. Sales and use taxes: exemptions:
unmanned aerial vehicle manufacturing: income taxes: credits: hiring.
The Sales and Use Tax Law imposes a tax on retailers measured by
the gross receipts from the sale of tangible personal property sold
at retail in this state, or on the storage, use, or other consumption
in this state of tangible personal property purchased from a
retailer for storage, use, or other consumption in this state, and
provides various exemptions from the taxes imposed by that law.
This bill would provide an exemption from those taxes for the
gross receipts from the sale of, and the storage, use, or other
consumption of, tangible personal property, as defined, purchased for
use in unmanned aerial vehicle manufacturing by a qualified person,
as defined. The bill would also exempt from those taxes the gross
receipts from the sale of, and the storage, use, or other consumption
of, tangible personal property purchased for use by a contractor, as
specified, for a qualified person. The bill would require the
purchaser to furnish the retailer with an exemption certificate, as
specified.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes
counties and cities to impose local sales and use taxes in conformity
with the Sales and Use Tax Law, and existing law authorizes
districts to impose transactions and use taxes in accordance with the
Transactions and Use Tax Law which conforms to the Sales and Use Tax
Law. Exemptions from state sales and use taxes are incorporated into
these laws. Section 2230 of the Revenue and Taxation Code provides
that the state will reimburse counties and cities for revenue losses
caused by the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for sales and use tax revenues
lost by them pursuant to this bill.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws.
This bill would, under both laws, for taxable years beginning on
or after January 1, 2014, and before January 1, 2024, allow a credit
in an amount equal to a specified percentage of the qualified wages,
as defined, paid or incurred by a taxpayer that manufactures unmanned
aerial vehicles with respect to qualified employees, as defined,
during the taxable year, not to exceed $20,000 per year, per
qualified employee.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6376.6 is added to the Revenue and Taxation
Code, to read:
6376.6. (a) On and after January 1, 2014, and before January 1,
2024, there are exempted from the taxes imposed by this part the
gross receipts from the sale of, and the storage, use, or other
consumption in this state of, any of the following:
(1) Tangible personal property purchased for use in unmanned
aerial vehicle manufacturing by a qualified person to be used
primarily in any stage of the manufacturing of property, beginning at
the point any raw materials are received by the qualified person and
introduced into the process and ending at the point at which the
manufacturing has altered property to its completed form, including
packaging, if required.
(2) Tangible personal property purchased by a contractor for use
in the performance of a construction contract for the qualified
person that will use the qualified tangible personal property as an
integral part of the manufacturing process, or as a facility for use
in connection with the manufacturing process.
(b) For purposes of this section:
(1) "Manufacturing" means the activity of converting or
conditioning property by changing the form, composition, quality, or
character of the property for ultimate sale at retail or use in the
manufacturing of a product to be ultimately sold at retail.
Manufacturing includes any improvements to tangible personal property
that result in a greater service life or greater functionality than
that of the original property.
(2) "Primarily" means tangible personal property used 50 percent
or more of the time in an activity described in subdivision (a).
(3) "Process" means the period beginning at the point at which any
raw materials are received by the qualified person and introduced
into the manufacturing activity of the qualified person and ending at
the point at which the manufacturing activity of the qualified
person has altered tangible personal property to its completed form,
including packaging, if required. Raw materials shall be considered
to have been introduced into the process when the raw materials are
stored on the same premises where the qualified person's
manufacturing activity is conducted. Raw materials that are stored on
premises, other than where the qualified person's manufacturing
activity is conducted, shall not be considered to have been
introduced into the manufacturing process.
(4) (A) "Qualified person" means a person who is engaged in the
line of business described in Industry Group 336411 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2012 edition,
that manufactures unmanned aerial vehicles.
(B) An affiliate of a person qualified pursuant to subparagraph
(A) shall also be considered a qualified person as long as the
affiliate is included as a member of that person's unitary group for
which a combined report is required to be filed under Article 1
(commencing with Section 25101) of Chapter 17 of Part".
(5) (A) "Tangible personal property," as used in this section,
includes, but is not limited to, all of the following:
(i) Machinery and equipment, including component parts and
contrivances such as belts, shafts, moving parts, and operating
structures.
(ii) All equipment or devices used or required to operate,
control, regulate, or maintain the machinery, including, without
limitation, computers, data processing equipment, and computer
software, together with all repair and replacement parts with a
useful life of one or more years, whether purchased separately or in
conjunction with a complete machine and regardless of whether the
machine or component parts are assembled by the qualified person or
another party.
(iii) Property used in pollution control that meets standards
established by this state or any local or regional governmental
agency within this state.
(iv) Special purpose buildings and foundations used as an integral
part of the manufacturing process, or that constitute a research or
storage facility used during the manufacturing process. Buildings
used solely for warehousing purposes after completion of the
manufacturing process are not included.
(v) Fuels used or consumed in the manufacturing process.
(B) "Tangible personal property" shall not include any of the
following:
(i) Consumables with a normal useful life of less than one year,
except as provided in clause (v) of subparagraph (A).
(ii) Furniture, inventory, and equipment used in the extraction
process, or equipment used to store finished products that have
completed the manufacturing process.
(iii) Tangible personal property used primarily in administration,
general management, or marketing.
(c) An exemption shall not be allowed under this section unless
the purchaser furnishes the retailer with an exemption certificate,
completed in accordance with any instructions or regulations as the
board may prescribe, and the retailer subsequently furnishes the
board with a copy of the exemption certificate. The exemption
certificate shall contain the sales price of the machinery or
equipment, the sale of, or the storage, use, or other consumption of
which is exempt pursuant to subdivision (a).
(d) Notwithstanding subdivision (a), the exemption provided by
this section shall not apply to any sale or use of property which,
within one year from the date of purchase, is removed from
California, converted from an exempt use under subdivision (a) to
some other use not qualifying for the exemption, or used in a manner
not qualifying for the exemption.
(e) If a purchaser certifies in writing to the seller that the
property purchased without payment of the tax will be used in a
manner entitling the seller to regard the gross receipts from the
sale as exempt from the sales tax, and within one year from the date
of purchase, the purchaser removes that property outside California,
converts that property for use in a manner not qualifying for the
exemption, or uses that property in a manner not qualifying for the
exemption, the purchaser shall be liable for payment of sales tax,
with applicable interest, as if the purchaser were a retailer making
a retail sale of the property at the time the property is so removed,
converted, or used, and the sales price of the property to the
purchaser shall be deemed the gross receipts from that retail sale.
(f) This section shall remain in effect only through and including
December 31, 2023, and is repealed on January 1, 2024.
SEC. 2. Section 17053.83 is added to the Revenue and Taxation
Code, to read:
17053.83. (a) For each taxable year beginning on or after January
1, 2014, and before January 1, 2024, there shall be allowed as a
credit against the "net tax," as defined in Section 17039, an amount
equal to the following:
(1) Fifty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2014, and before
January 1, 2016.
(2) Forty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2016, and before
January 1, 2018.
(3) Thirty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2018, and before
January 1, 2020.
(4) Twenty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2020, and before
January 1, 2022.
(5) Ten percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2022, and before
January 1, 2024.
(b) For purposes of this section:
(1) "Qualified taxpayer" means any taxpayer who is engaged in the
line of business described in Industry Group 336411 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2012 edition,
that manufactures unmanned aerial vehicles.
(2) "Qualified employee" means an individual whose services for
the qualified taxpayer are performed in this state and are at least
90 percent directly related to the qualified taxpayer's line of
business described in Industry Group 336411 of the North American
Industry Classification System (NAICS) published by the United States
Office of Management and Budget (OMB), 2012 edition, manufacturing
unmanned aerial vehicles.
(3) "Qualified wages" means that portion of wages paid or incurred
by the qualified taxpayer during the taxable year with respect to
qualified employees that are direct costs as defined in Section 263A
of the Internal Revenue Code allocable to property manufactured in
this state by the qualified taxpayer.
(c) The credit allowed by this section shall not exceed twenty
thousand dollars ($20,000) per year, per qualified employee. For
employees that are qualified employees for part of a taxable year,
the credit shall not exceed twenty thousand dollars ($20,000)
multiplied by a fraction, the numerator of which is the number of
months of the taxable year that the employee is a qualified employee
and the denominator of which is 12.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and seven succeeding years if necessary,
until the credit is exhausted.
(e) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section.
(f) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
SEC. 3. Section 23623.3 is added to the Revenue and Taxation Code,
to read:
23623.3. (a) For each taxable year beginning on or after January
1, 2013, and before January 1, 2023, there shall be allowed as a
credit against "tax," as defined in Section 23036, an amount equal to
the following:
(1) Fifty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2014, and before
January 1, 2016.
(2) Forty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2016, and before
January 1, 2018.
(3) Thirty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2018, and before
January 1, 2020.
(4) Twenty percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2020, and before
January 1, 2022.
(5) Ten percent of qualified wages paid or incurred during any
taxable year beginning on or after January 1, 2022, and before
January 1, 2024.
(b) For purposes of this section:
(1) "Qualified taxpayer" means any taxpayer who is engaged in the
line of business described in Industry Group 336411 of the North
American Industry Classification System (NAICS) published by the
United States Office of Management and Budget (OMB), 2012 edition,
that manufactures unmanned aerial vehicles.
(2) "Qualified employee" means an individual whose services for
the qualified taxpayer are performed in this state and are at least
90 percent directly related to the qualified taxpayer's line of
business described in Industry Group 336411 of the North American
Industry Classification System (NAICS) published by the United States
Office of Management and Budget (OMB), 2012 edition, manufacturing
unmanned aerial vehicles.
(3) "Qualified wages" means that portion of wages paid or incurred
by the qualified taxpayer during the taxable year with respect to
qualified employees that are direct costs as defined in Section 263A
of the Internal Revenue Code allocable to property manufactured in
this state by the qualified taxpayer.
(c) The credit allowed by this section shall not exceed twenty
thousand dollars ($20,000) per year, per qualified employee. For
employees that are qualified employees for part of a taxable year,
the credit shall not exceed twenty thousand dollars ($20,000)
multiplied by a fraction, the numerator of which is the number of
months of the taxable year that the employee is a qualified employee
and the denominator of which is 12.
(d) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and seven succeeding years if necessary,
until the credit is exhausted.
(e) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate to carry out the purposes of this
section.
(f) This section shall remain in effect only until December 1,
2024, and as of that date is repealed.
SEC. 4. Notwithstanding Section 2230 of the Revenue and Taxation
Code, no appropriation is made by this act and the state shall not
reimburse any local agency for any sales and use tax revenues lost by
it under this act.
SEC. 5. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.